Texas state laws provide for another avenue to obtain money or valuable property to satisfy a judgment that the defendant/debtor is trying to avoid paying, and that is through the professional efforts of a court-appointed receiver.
Under Section 31.002 of the Texas Civil Practice and Remedies Code, a judgment creditor may “obtain satisfaction on [a] judgment if the judgment debtor owns property, including present or future rights to property, that is not exempt from attachment, execution, or seizure for the satisfaction of liabilities.” To gain possession of this property, the court may order the appointment of a “receiver” or a “turnover receiver” who can sell the property and then pay out the proceeds to a creditor to satisfy an open judgment.
What Is Receivership?
Receivers and receiverships in Texas describe situations when a third party receiver appointed to property by a judge is given the responsibility of locating and liquidating the defendants’ nonexempt property in order to pay a judgment. The “turnover order” is the procedural mechanism for these grants of power. A plaintiff/creditor can make a motion for a turnover order and appointment of a receiver, and the defendant/debtor will have the opportunity to mount an objection to the appointment of a receiver.
Courts in Texas have held that the purpose of the turnover orders is to aid the diligent judgment creditor in obtaining satisfaction of his or her judgment in a timely manner when it seems all other options have failed or are likely to fail. Judge David Hittner, quoting the legislative intent of the receivership statute: “[t]he traditional methods of reaching property of a judgment debtor to satisfy a judgment have been found inadequate in cases where the judgment debtor has property outside the State of Texas, where the judgment debtor owns property interests in such items as contract rights receivable, accounts receivable, commissions receivable and similar acts to property or rights to receive money at a future date….The bill [puts] a reasonable remedy in the hands of a diligent judgment creditor, subject to supervision of the court.” See Excavating, Inc. v. Richardson. Thus, turnover orders are also essential for certain types of property in Texas that are difficult to reach.
Types of Receiverships
There are several types of receiverships, which vary based upon the purpose assigned to the receiver, including:
- Receiver on behalf of a vendor seeking to vacate a fraudulent purchase of property;
- In an action by any creditor to subject property or funds to their claims;
- In an action between partners or others jointly owning or interested in any property or fund;
- In an action by a mortgagee for foreclosure of the mortgage and sale of the mortgaged property;
- For a corporation that is insolvent, is in danger of becoming insolvent, has been dissolved, or has forfeited its corporation rights; or
- In other cases where fairness requires a receiver.
Court-Appointed Receivers for Judgment Collection
So what is a court receiver? Sections 64.021, 64.022, 64.023 of the Texas Civil Practice and Remedies Code state that a court-appointed receiver must have the qualifications of being a citizen of Texas and a registered voter at the time of appointment, be a disinterested party, take an oath, and be able to post a bond through the completion of their court-ordered efforts. Many attorneys, including experienced attorneys Seth Kretzer and James Volberding, have frequently served in this role.
Turnover Orders – Texas Civil Practice & Remedies Code Section 31.002
The term “turnover” comes from the trial judge’s ability to order the debtor to deliver or “turn over” nonexempt assets to an officer or a receiver. See Ex parte Johnson. Turnover may take place with property that is owned by the judgment debtor and not exempt from attachment, execution, or seizure for the satisfaction of liabilities. See Criswell v. Ginsberg & Foreman. When identifying property subject to turnover, “the trial court’s order must be definite, clear, and concise, leaving the debtor no doubt about his duty and not calling for interpretation, inferences, or conclusions.” See Finotti v. Old Harbor Co.
Under the Texas Code, a turnover order may be enforced by contempt proceedings. In other words, if any person interferes with the execution of the turnover order, such as the defendant/debtor trying to interfere with the sale of property, the defendant risks being haled into court and possibly being sent to jail.
What Happens When a Receiver Is Appointed?
Once appointed, the receiver may sell the property and pay out the proceeds to a creditor to satisfy a judgment. The receiver’s powers also include being able to take charge of and keep possession of property, receive rents from property, collect and compromise demands related to property, transfer property and perform any other acts related to property that are authorized by the court.
The Law Offices of Kretzer & Volderbing P.C. Can Act as Court-Appointed Receivers
When you need professional receivership assistance, you want lawyers with specific experience on receivership in Texas and who have the right knowledge and resources to help you. Call us at 713-775-3050 or visit us online today to learn more about our attorneys Seth Kretzer and James Volberding.